Correlation Between Ultrasmall-cap Profund and Rmb Fund

Can any of the company-specific risk be diversified away by investing in both Ultrasmall-cap Profund and Rmb Fund at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ultrasmall-cap Profund and Rmb Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ultrasmall Cap Profund Ultrasmall Cap and Rmb Fund I, you can compare the effects of market volatilities on Ultrasmall-cap Profund and Rmb Fund and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ultrasmall-cap Profund with a short position of Rmb Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrasmall-cap Profund and Rmb Fund.

Diversification Opportunities for Ultrasmall-cap Profund and Rmb Fund

0.94

Correlation Coefficient

Ultrasmall-cap Profund  Rmb Fund

Almost no diversification

The 3 months correlation between Ultrasmall-cap and Rmb is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Ultrasmall Cap Profund Ultrasm and Rmb Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rmb Fund I and Ultrasmall-cap Profund is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ultrasmall Cap Profund Ultrasmall Cap are associated (or correlated) with Rmb Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rmb Fund I has no effect on the direction of Ultrasmall-cap Profund i.e., Ultrasmall-cap Profund and Rmb Fund go up and down completely randomly.

Pair Corralation between Ultrasmall-cap Profund and Rmb Fund

Assuming the 90 days horizon Ultrasmall Cap Profund Ultrasmall Cap is expected to under-perform the Rmb Fund. In addition to that, Ultrasmall-cap Profund is 2.59 times more volatile than Rmb Fund I. It trades about -0.11 of its total potential returns per unit of risk. Rmb Fund I is currently generating about -0.1 per unit of volatility. If you would invest  3,558  in Rmb Fund I on December 23, 2024 and sell it today you would lose (200.00) from holding Rmb Fund I or give up 5.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Ultrasmall Cap Profund Ultrasm  vs.  Rmb Fund I

Ultrasmall Cap Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultrasmall Cap Profund Ultrasmall Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Rmb Fund I

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rmb Fund I has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Rmb Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultrasmall-cap Profund and Rmb Fund

The main advantage of trading using opposite Ultrasmall-cap Profund and Rmb Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultrasmall-cap Profund position performs unexpectedly, Rmb Fund can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Rmb Fund will offset losses from the drop in Rmb Fund's long position.

The idea behind Ultrasmall Cap Profund Ultrasmall Cap and Rmb Fund I pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.